March 25, 2009

Typically, every day either myself or one of the other attorneys in my office are consulted as to whether a client should purchase long term care insurance. Many of the individuals requesting this information could be considered “old,” and therefore, they either cannot afford to purchase the insurance, or they are not healthy enough to acquire it, as they are not insurable by standards of insurance companies.

Many people also believe that Medicare will cover chronic care, but this is not the case.

So how do you determine whether you should purchase insurance, and when? It is estimated that the cost of long-term care insurance doubles if you obtains it at the age of sixty-five vs. fifty-five. So is it better to pay an additional ten years for the coverage or risk becoming uninsurable when you want to purchase it? While deciding, here is a list of factors that you should consider:

The amount of the benefit

The length of time for coverage

The period for paying out of pocket (deductible)

Inflation protection (if so, simple or compounded)

Provisions to continue to pay for care even if the insured stops paying premiums

You should always consider the implications of not purchasing coverage, such as whether you can afford to self-insure until funds are diminished to the extent that Medicaid will cover your care either at home or in an institution. If you have sufficient income to cover care, such as retirement benefits, pensions, social security, etc., then you don’t need to insure 100% of the cost of care, but merely the difference. However, if you don’t want to pay for any of your own care out of pocket, you may need to purchase coverage to preserve income and assets.

You should also review the homecare benefit to determine whether the policy will cover both licensed and unlicensed caregivers and also pay for community programs such as adult day care if and when necessary.

It is important to review all options before you buy in order to make an intelligent and educated decision.

March 18, 2009

We regularly receive notes from our clients thanking us for preparing their legal documents, but the following letter is unique. It tells a heartfelt story of how one woman's estate planning spared her family from wondering what she would have wanted and assured that the woman's life ended on her own terms. It exemplifies the importance of a Health Care Proxy:

In
2004, my mother was eighty one years old. She was a widow with nine children.
Though her health and spirits were very good, after her 80'h
birthday, she felt the need to review her assets and affairs, with an eye
toward the future. She felt this was a necessary task, but approached it
reluctantly, because she was somewhat superstitious about planning in relation
to death, and also, because, she did not feel old.

In
the fall of 2004, she visited with Mr. Hyman Darling, at Bacon Wilson, to
discuss her estate plan. Having an advocate who was focused solely on her
concerns, was in itself, very valuable to my mother because it allowed her an
opportunity to make independent decisions about the assets. This was not always
easy for Mom, because she was very sensitive to the disapproval of any of her
children, and as you might expect, each of us had an opinion about what she
should do with her financial assets.

In
the course of helping my mother with her plan, you prepared a Health Care
Proxy, which she signed, authorizing my sister, a nurse, to make decisions
regarding her health care if Mom did not have the capacity to do so. This Proxy
turned out to be very important.

On
the morning of Tuesday, July 28, 2008, my mother suffered a stroke in her home,
as she was getting ready to prepare breakfast. Fortunately, my brother was at
home with her. He called the ambulance, and she was rushed to Bay State Medical
Center. He called me from the ambulance, and told me that my mother was barely
conscious. She could not speak, but seemed to know he was there, and when he
held her hand, she squeezed it.

Because
she arrived at the hospital so quickly after having the stroke, and because of
the type of stroke, she was a candidate for tPA, the clot dissolving medicine.
When the tPA was administered, she seemed to be able to recognize my brother,
but sadly, the tPA was not successful for her. We learned the next day that she
had suffered what the neurologist described as "a non-survivable
stroke."

The
stroke was large, and effectively destroyed about two thirds of one side of
Mom's brain. She could not move her right side, could not speak and could not
swallow. We were not sure whether she could see; on the day after the stroke
her eyes were open, but they were very clouded. She seemed to respond to some
voices, but not to every sound. Mom was dying, but because she had a strong
heart and was generally in good health, she would not die immediately.

We
children were not prepared to hear that our mother was dying. The very
emotional discussion ranged from whether brain surgery was an option, through
whether we should move Mom to Boston and, because we did not have a timetable
for this process, to whether we should insert a feeding tube. Fortunately, we
had the Health Proxy to guide us.

The
Proxy provided direction from our Mother about what to do for her in her final
days. She did not want any extraordinary steps taken to artificially prolong
the dying process. The Proxy described those steps as well, and answered our
question about agreeing to a "Do Not Resuscitate" order and
instructing the doctors not to insert a feeding tube.

As
I relate these events now, some months after my mother's death, it sounds like
we had some rational discussion and made some logical decisions. Those days
however, were not days of rational thought. There was certainly denial of the
terminal nature of Mom's condition, crazy optimism that a sigh or a movement
meant she was coming back to us and disbelief that the doctors were correct.
The Proxy gave my sister guidance, and the authority (she's not the oldest of
the siblings) to make the decisions that needed to be made.

It
was very difficult to make those decisions, because, it was our mother in the
hospital bed, and we were not ready for her to die. However, if we had not had
the proxy, the last week of her life - she lived for five days after the day of
the stroke -- would have been much more difficult. Having the Proxy to guide us
allowed us to expend our energy during those last days in serving our mother by
being with her, singing to her and praying with her, rather than in debate
among ourselves about what we thought Mom would want. I would like to think we
would have made decisions about her care that she would have wanted, but that's
just it-we would have been guessing. And today, as I write this, instead of
being at peace with the fact that we did what my mother wanted, I would have
doubt and probably still second guessing decisions made.

The
Health Proxy gave my mother what she wanted - a say in how she wanted to be
cared for in those final days, when she could not speak for herself. It also
provided us with directions to follow at a time when our judgments were
affected by fear and sadness, and a reassurance that we were doing the right
thing for our mother.

Finally,
I want to thank you and your staff for providing a copy of the proxy to the
hospital when I called. Everyone I spoke with at Bacon Wilson was courteous,
and inspired confidence.

March 11, 2009

The Worker, Retiree, and Employer Recovery Act of 2008 provides for several alternatives for individuals in 2009. Due to the fact that the financial markets have dramatically reduced their values in the last quarter of 2008, the government felt it would be unfair to require individuals to take the minimum distribution in 2009 based on the value as of 12/31/08. Therefore, they have suspended the requirement that a distribution has to be made if a person is 70-½ as previously required.

In this manner, a person may allow the normal withdrawal to remain in the IRA so that it will hopefully come back in value and continue to build the account rather than have it be reduced. In prior years, if you did not take a distribution which was at least the minimum distribution required, the amount that you did not withdraw was taxed at an exorbitant rate of 50%.

The law that suspends the required minimum distribution in 2009 applies to all defined benefit plans: 401k plans, 403b plans, 457b plans, and IRA plans.

A second option is that a person may continue to withdraw funds from their IRA (not 401k or other qualified plans) and make charitable deductions directly from the IRA to the charity. The owner of the fund must be over 70-½, but the distribution that is being made may count towards the minimum required distribution.

Therefore, if a person had an interest in making charitable contributions or had pledged certain amounts to various charities, it would make considerable sense to have these funds from the IRA used to pay the charitable contribution rather than other liquid assets. However, the funds must be paid directly from the holder of the funds to the charity, and the funds may not pass through the hands of the account owner. This contribution may be made at any time during the year, so it may require a thoughtful decision as to when the contribution should be made based on when a person may feel the account will either increase or decrease in value.

Naturally, with any tax related matter, it is important to obtain advice in advance prior to the decision being made as these options are irreversible once made.